Applications of RPA in Public Accounting

RPA in Audits

Due to the repetitive nature of many audit tasks, RPA can make financial statement audits more efficient, accurate, and less expensive. A paper in the Journal of Emerging Technologies in Accounting comprehensively examines how RPA can be used in audit (Moffitt et al., 2018).

These researchers note that auditors had used various automation tools before RPA became as popular as it is today. For example, Excel macros, IDEA, ACL, R, and Python could all be used to automate various audit tasks. However, many of these tools cannot perform as seamlessly as RPA and may require the user to have basic to advanced programming skills.

For example, auditors use Excel for sample selection, testing, and documenting audit procedures. The audit templates require manual editing to enter data, perform calculations, and document results. Macros can be used to automate certain rules-based functions such as account reconciliations.

Programs such as ACL and IDEA can be used for a variety of audit calculations and use for analytical procedures, internal control testing, and detail testing.

Scriptable languages such as Python and R also facilitate automation but requires users to have strong programming skills. These tools are free and more flexible than Excel, ACL, or IDEA to automate audit tasks.

Although these traditional audit tools are useful, RPA technology can often perform similar tasks more efficiently. As a result, audit firms are increasingly adopting RPA for manual and repetitive audit tasks such as account reconciliations, internal control testing, and detail testing. Popular RPA vendors include UiPath, Blue Prism, and Automation Anywhere. These programs offer similar automation capabilities as Excel, ACL, IDEA, Python, and R but do not require programming at the user-level interface.

As a result, RPA will transform the role of the auditor. Instead of collecting data, processing, analyzing, and disseminating, auditors will focus more on the evaluation component of audit procedures (Moffitt et al., 2018).

Finally, Moffit et al. (2018) note that before this transition takes place, audit firms must consider the following:

• 1 Which audit process should be targeted for automation?
• 2 How can audit procedures be distilled into small steps suitable for automation?
• 3 What audit procedures can result in automation?
• 4 Are data in a machine-readable format?
• 5 Based on the assessments made in previous stages, what audit procedures should be targeted for automation?
• 6 Does RPA function as envisioned in the prototyping stage?
• 7 Through evaluation and feedback, can areas for improvement be identified? (p. 5)

Valuable insight from these recommendations is vital for firms to develop a framework to assess how RPA can be used strategically in an audit. Firms should target processes that will yield the most significant benefit for the least cost and effort. Carefully thinking about these considerations before implementation, and then monitoring the results after deployment will ensure success.

RPA in Tax

Manual and repetitive tasks commonplace in tax departments are ideal candidates for automation in general and RPA. PwC provides several examples of how RPA can be used for tax functions (PwC, 2017). RPA can export trial balances from ERP systems that will then be used to prepare the tax return. Trial balance information can be converted to a tax basis by assigning book basis accounts to tax basis account numbers and reconciling intercompany transactions. RPA could then assist in preparing the tax returns by automatically completing tax return line items and information fields and then submitting online. Next, RPA could be used to account for taxes by calculating deferred taxes and booking deferred tax accounting entries in the GL system. Finally, RPA could be used to address tax inquiries, such as gathering data to respond to an audit. Fixed asset sub-ledger data, as well as industry and company-specific data, could also be automatically exported.

PwC deployed RPA for one of their consumer healthcare clients, a company with over 100 legal entities with offices worldwide, and in multiple US states (PwC, 2017). This client used a variety of financial systems, trial balances, and chart of accounts. Manual spreadsheets were also used to calculate the interim provision calculations. Due to disparate financial systems and processes, gathering and reconciling the data was a manual and time-consuming process.

PwC’s solution was to deploy RPA to ease the following operations: extract the financial information from the ERP systems, clean the data and reconcile accounts, organize the data by a legal entity versus management reporting, analyze account changes (such as accrual book and tax adjustments), and then flag account differences for follow-up investigation. The impact of this intervention accelerated the completion of the income tax provision, reduced manual effort by 10% to 25%, improved overall accuracy, and reduced the time necessary to perform low-value work such as data extraction and manipulation.